Eric Nuttall called it - energy investors should have a Merry Christmas

Inflation may be here to stay

The “climate change” cult’s war on fossil fuels is going to bite back. Founded solely on political science and devoid of support under the laws of physics, the inane idea that CO2 causes climate change has seen leftist governments in America, Canada, Germany, France and most of Western Europe spout the narrative that the world has to fear catastrophic warming arising from a small increase in atmospheric CO2 levels incapable of causing the apocalypse they claim. In reality, the ability of CO2 to “trap” more outgoing long wave infrared radiation has long since been saturated¹ and the dramatic theatre hosted by Justin Trudeau and his activist ministers Steven Guilbeault or the U.S. climate Czar John Kerry are theatre, not science.

Wise to the world’s need for a cheap and reliable source of energy, oil & gas producers have reacted sensibly to the attack by cutting investment and curtailing supply, with Joe Biden’s attempt to lower U.S. gasoline prices by squandering the safety net of the Strategic Reserve by drawing over 180 million barrels simply saw Saudi Arabia and Russia cut output by a similar amount and prices remain firm. Now the inescapable shortage is in high gear and the price of oil (the major contributor to world inflation) is rising again, shown in this chart courtesy of Bloomberg.

Bloomberg estimates the fourth quarter shortage of oil supply will exceed 2 million barrels a day.

If the forecast is correct, that imbalance will manifest itself in higher oil prices, and the costs of diesel, gasoline, home heating fuel, electricity and every energy source that is derived from fossil fuels will move higher and inflation will rise rather than the hope for “soft landing” the talking heads on Bloomberg, MSNBC, BNN and all of the other sell-side hopeful media keep praying for.

Much higher rates will be needed to curb the inflationary spiral and will be effective only if they can compel higher unemployment, a material GDP contraction, and a deeper than mild recession, all of which will cause pain to voters just as America heads into the 2024 Presidential election and the possible Canadian election sure to follow. Two heads should fall - Biden and Trudeau - although Scholz, Sunak, and the labor party leaders of Australia and New Zealand (Hipkins and Albanese) may be on waivers as well. The deeply alarming housing crisis in North America will get worse as higher rates force borrowers who can’t pay out of their homes and banks will eat higher than expected credit losses.

For the fortunate few who never bought into the “climate crisis” nonsense and hold investments in oil & gas producers, this Christmas may have presents. Energy analyst and fund manager Eric Nuttall projected the shortage and his clients will benefit from his courage.

1. Dieter Schildknecht, Saturation of the infrared absorption of CO2 in the atmosphere, Cornell University, March 27, 2020.